Blackstone and La Caisse are leading a C$2.5 billion minority investment in Air Canada’s Aeroplan loyalty business, valuing the platform at C$10 billion while giving Air Canada additional capital to reduce debt and accelerate stock repurchases.
The investor group, which also includes PSP Investments and British Columbia Investment Management Corporation, is acquiring a 25% non-controlling stake in Aeroplan.
Air Canada will retain 75% ownership and full control over Aeroplan’s strategy, operations and day-to-day management.
The transaction effectively allows Air Canada to monetize part of one of its most valuable customer assets without giving up control of the loyalty program.
Aeroplan has more than 10 million members and relationships spanning more than 50 airline partners and over 1,300 destinations.
Air Canada plans to use proceeds first to repay an upcoming US$1.2 billion, approximately C$1.7 billion, bond maturity.
Most of the remaining proceeds are expected to be directed toward accelerated share repurchases.
Air Canada separately plans a substantial issuer bid of up to C$800 million, structured as a modified Dutch auction and expected to be completed in September.
The minority investors will participate in Aeroplan distributions under an agreed policy.
Air Canada will have the option to repurchase the investors’ Aeroplan stake between the fifth and eighth anniversaries of the transaction, as well as following certain specified events.
The repurchase formula is designed to provide the investors with a 6.5% internal rate of return net of distributions.
The structure therefore gives Blackstone, La Caisse, PSP and BCI exposure to Aeroplan’s cash generation while preserving Air Canada’s ability to eventually regain full ownership.
Support: BofA Securities, Stikeman Elliott and Deloitte advised Air Canada and Aeroplan. Scotiabank, Kirkland & Ellis and Blake Cassels advised Blackstone.
KEY QUOTES:
“This investment highlights Aeroplan as a differentiated loyalty platform and showcases the exceptional value created since its acquisition. The transaction strengthens Air Canada’s financial position by unlocking value from Aeroplan while retaining full operational control.”
“It provides additional financial flexibility, and supports our pursuit of an investment grade rating, as we execute our long-term strategic plan, for the benefit of our customers, employees and investors.”
John Di Bert, Executive Vice President and CFO of Air Canada
“Air Canada has established Aeroplan as one of Canada’s leading loyalty programs, with strategic partnerships across travel, financial, and commercial sectors. We are pleased to welcome Blackstone, La Caisse and other leading Canadian institutions as minority investors in Aeroplan as we continue to strengthen and expand Aeroplan’s global appeal.”
Craig Landry, Executive Vice President & Chief Innovation Officer of Air Canada and President of Aeroplan
“We are proud to support Air Canada and the leading loyalty platform they’ve built in Aeroplan. Blackstone is a long-term believer in Canada as both a compelling place to invest and serve clients. This transaction adds to our decades-long commitment to the country and is another example of our ability to provide flexible, efficient capital solutions to leading businesses around the world.”
Mark Rutledge, Senior Managing Director at Blackstone
“This investment in Aeroplan, one of the country’s leading loyalty programs built by Air Canada, reflects La Caisse’s ability to structure tailored capital solutions backed by a strategic asset, alongside a strong group of co-investors. It is also an attractive diversification opportunity for our global portfolio, which ultimately benefits our depositors.”
Martin Longchamps, Executive Vice-President and Head of Private Equity and Private Credit at La Caisse
